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First Homes Scheme step-by-step guide

First Homes is a government-backed homeownership scheme in England, launched in 2021. It’s designed to help eligible first-time buyers purchase a home at a discount to its market value.

First Homes are the government’s preferred discounted market tenure and should account for at least 25% of all affordable housing units delivered by developers through planning obligations.

How does it work? The idea is that the discount remains attached to the property when it is subsequently sold to another eligible buyer.

To be considered, you must meet certain conditions, including age (you must be over 18), and able to get a mortgage for at least half the price of the home. Councils may also set local eligibility criteria that you must meet.  

One thing to note: you will still need to arrange a mortgage and meet the lender’s affordability and eligibility requirements.

If you think you might qualify for the First Homes scheme, James Leighton Financial Services can help you understand your mortgage options and borrowing capacity.

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Who is eligible for the First Homes scheme?
 

To be eligible for the First Homes scheme, you must be a first-time buyer aged 18 or over, meet the household income limit and use the property as your only or main residence. You must also be able to obtain a mortgage for at least half the discounted purchase price.

You must:

  • be 18 or older
  • be a first-time buyer
  • buy a property that will be your sole or main residence
  • be able to get a mortgage for at least half the price of the home
  • not earn more than £80,000 a year before tax (£90,000 if the property is in London)

Furthermore, new build First Homes cannot cost more than £250,000 (or more than £420,000 if the property is in London) after the discount has been applied. The local council can lower this maximum price.

Local eligibility criteria

Councils may set local eligibility criteria. For example, some councils may prioritise giving First Homes discounts to:

  • key workers, as defined by the council
  • people who already live in the area
  • those on lower incomes

This means requirements can vary, depending on property and area. And don’t forget that meeting the scheme’s eligibility does not automatically mean that you will qualify for a mortgage. Your best bet is to speak to one of our experienced mortgage brokers before searching for a suitable property.

How much is the First Homes discount?

You can look for new homes in your area that are advertised by developers or estate agents through the First Homes scheme.

Developers offer these homes to first-time buyers with at least 30% of the market value taken off the price. This is the standard discount but local authorities may require a higher discount in some circumstances.

How does it work? For example, a property with a valuation of £320,000 could be sold for £224,000 (below the £250,000 cap) with the scheme’s standard 30% discount applied.

Please note that these rules were correct at time of writing.

What happens when you sell a First Homes property?

Don’t forget that the discount is attached to the property. This means that when you sell, the same percentage discount is applied to the property’s market value and it must be sold to another eligible First Homes buyer.

What properties are available through First Homes?

The home can be:

  • a new home built by a developer
  • a home you buy through an estate agent, which someone else bought before through the scheme

Clearly, the types of properties offered through the scheme depend on eligible developments or properties in your chosen area. You cannot pick any home on the market and apply a First Homes discount to it.

How much deposit will you need?

You will typically need a deposit of 5% of the discounted purchase price for a home under the First Homes scheme. However, this will depend on the mortgage lender and your circumstances. However much the deposit is, this sum will be calculated after the 30% (or more) discount is applied.

First Homes versus other homeownership options

There are other options available outside of the First Homes scheme. Shared ownership is one of those options. With this arrangement, the buyer purchases an agreed percentage of the property and pays rent on the remainder. Other options include the Own New Rate Reducer, a private-sector initiative. This scheme reduces the cost of borrowing by having the developer subsidise the mortgage interest rate for a fixed period (typically two to five years).

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Establish your First Homes budget

When it comes to setting your budget, you can rely on James Leighton Financial Services. Our team will assess affordability and determine the approximate amount you may be able to borrow.

Get a mortgage Decision in Principle

A Decision in Principle (DIP) is an initial estimate from a lender showing how much they might be willing to lend you. While it is not a guarantee of a mortgage, it does indicate your potential borrowing capacity.  

Find an eligible First Homes property

Now’s the exciting part: finding a home. Whichever property you choose, it must be through the First Homes scheme. If you’re struggling with the search, remember that you can call on:

  • Developers
  • Estate agents 
  • Local authorities

Availability will vary considerably depending on area.  

Apply for the First Homes scheme

Be aware that you may need to provide proof of eligibility for the First Homes scheme.

Make an offer on the property

You’ve identified an eligible property that falls within your budget. What next? Contact the developer or estate agent (if you’re buying from a previous First Homes buyer) and tell them you want to buy a property through the First Homes scheme.

The next step is to consider the mortgage and legal process.

Submit your full mortgage application

Found an eligible property and ready to proceed? Here’s the process:

  • Confirm borrowing requirements
  • Identify a lender that will lend through the First Homes scheme
  • Select a suitable mortgage product
  • Submit the full mortgage application
  • Provide financial and scheme-related documentation

You may find that different lenders approach the scheme differently, which is where mortgage advice comes in.

Valuation and underwriting

The lender will assess your affordability and circumstances and arrange a valuation of the property. Satisfying the First Homes eligibility criteria and obtaining mortgage approval are separate requirements.

Mortgage offer issued

Once approved, the lender issues the formal mortgage offer setting out the loan amount, interest rate, mortgage term and relevant conditions.

Legal work

The solicitor / conveyancer completes the usual property searches and legal checks as well as dealing with the requirements associated with purchasing a First Homes property. It’s important to use a conveyancer who fully understands the scheme.

Exchange and completion

Now it’s time to exchange contracts, agree the completion date, transfer funds and become the legal owner of the property.  

Owning and selling a First Homes property

You need to remember the long-term restrictions, for example, if you decide to sell. In other words, the discount that remains attached to the property for future eligible purchasers.

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FAQs

What is the First Homes scheme?

The First Homes scheme is a government-backed initiative in England designed to help first-time buyers purchase a home at a discount of 30% to 50% below its open market value.

Who is eligible for the First Homes scheme?

To qualify you must be at least 18, a first-time buyer and the home must be your only property. Your household income must not exceed £80,000 a year before tax (£90,000 in London).

How much discount can you get through First Homes?

You can purchase a home with a discount of 30% to 50% of its open market value.

How much deposit do I need for the First Homes scheme?

You will typically need a deposit of 5% of the discounted purchase price for a home under the First Homes scheme. However, this will depend on the mortgage lender and your circumstances.

Can I get a mortgage for a First Homes property?

Yes. However, you must take out a specialised First Homes mortgage if you are buying a property through the scheme.

Where can I find First Homes properties?

You can find First Home scheme homes through developers, estate agents and local councils.

Are all new-build properties available through First Homes?

No.

Can key workers get priority for First Homes?

Yes, key workers can get priority for First Homes but it depends entirely on the rules set by your local council.

What happens when I sell a First Homes property?

When you sell a First Homes property, the special discount and eligibility rules you agreed on continue.  

Is the First Homes scheme the same as Shared Ownership?

No. Shared Ownership involves purchasing a percentage share of the property price and paying rent on the remainder.

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